Q19 of 38 Page 1

State which of the following statements are true or false. Give valid

reasons.


(a) According to Keynesian theory of employment, a state of


under-employment can never exist in an economy.


(b) In a two-sector economy, if income is zero, average propensity to


consume will also zero.


a. The statement is false.According to the Keynseian theory of employment, the state of under employment does not exist. It may occur at the level of income where equilibrium between aggregate demand and agregate supply happens at less than the full employment level.


b. The statement is false. At zero income,autonomous consumption may exist for survival. So, APC will not be zero.


More from this chapter

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7

Given the following schedule, state at which level of output, will the firm

be at equilibrium and why.



 10

What is meant by ‘negative returns to a factor’ ? Discuss any two

reasons behind negative returns to a factor.


 18

If marginal propensity to consume is 80% and is constant at all levels of

income, and the autonomous consumption is Rs. 400 crores, construct


consumption function of the given hypothetical economy.


 23

Given the following data, find the values of ‘Operating Surplus’ and ‘Net Exports’ :